Richmond seeks development cash

Richmond says the offering will coincide with plans to list its ordinary shares on the NZSE early next year, and will be an initial issue of $30 million with rights to accept oversubscriptions for a further $20 million. The company is currently traded on the unlisted securities market.

Recent capital notes issues have been snapped up by investors looking for higher-yielding fixed-interest products, including an issue from Montana who had to scale back public pool applications because of strong demand.

Richmond says the funds raised from the issue will strengthen its balance sheet, diversify its funding base, and position it for further industry change and the next stage of its development as a food company. They will also be applied to the repayment of $11.2 million of current bonds, which expire in September next year.

In the past three years the meat processing company has expanded substantially with its acquisition of the assets of Lowe Walker Group and Gourmet Direct, the merger with Waitotara Meat Company, and the establishment of FoodTech, its major further processing facility at Takapau in Central Hawkes Bay.

Chief executive John Loughlin says Richmond is pursuing a market strategy that requires a network of its own international offices to gain higher prices rather than volume business.

"Such a strategy requires the maintenance of a strong balance sheet, because as you deal more directly with end users, there is a requirement to provide the normal commercial terms of trade. In contrast, importer and agency arrangements generally play a role in funding the supply chain. Such arrangements have a direct and indirect cost."

Mr Loughlin said that going forward those meat companies with strong capital structures would be best able to manage future industry change to their own advantage.

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